I recently ran into this issue when trying to start an upgrade from GP 2010 to GP 2013.  Here is the scenario:

• A test server had been created, and copies of the live gp databases restored
• A fresh install of GP 2010 was on the test server, and the companies could be accessed through the GP client.
• A new install of GP 2013 was completed, with the latest service pack.  Rolled with the default to create a new data source, and to keep the system database name as DYNAMICS
• Windows Server 2008 R2 and SQL 2008 R2

When running GP 2013 Utilities, it asked to create a new system database, which I thought was weird since a DYNAMICS database was already present on the server, and I specified during the install to use that name.  I clicked to create a Basic install, and then when it tried that, up popped this error message:

“A system database name was not supplied.  Run a repair of the Microsoft Dynamics GP installation.”

I could only hit OK and then Utilities closed.  Using my freshly gained knowledge at Convergence 2013, there is a new line in the Dex.ini file that keeps track of the system database name.  That line is called “Pathname”, and it should look like this:

Pathname=DYNAMICS/dbo/

Where DYNAMICS is the name of the system database.  However, it seems that after an initial install, that line reads Pathname=/dbo/ with no system database name.

After updating the file to read correctly (Pathname=DYNAMICS/dbo/) I was able to run GP 2013 Utilities and perform the update.

What fun!